Horton Hears a Who Matters?

SPX is still below MOMO, and VIX remains above its trend, indicating a negative outlook for the index.

We are still hovering between trend levels, and closing below 5384 would put us into full negative territory.

Looking at the QQQs, we cannot ignore the impact that large tech names have on the index.

The largest names hold the biggest weights in both SPY and QQQ, as I’ve shown with “market cap” adjustments. They have a significant impact on breadth and overall market movement.

Moreover, these companies are also the most actively traded in the options space. They have large leveraged ETFs and structured products based on them, not just in the U.S., but globally.

They matter.

They also matter to me because I have a 2% position size limit when building my portfolio. If I miss catching AAPL during its trend, it creates a timing deficit, and I’m unable to match its 6% index weighting.

On the other hand, I tend to outperform when sectors like Utilities work, as they currently do. While Utilities make up less than 4% of the index, at certain points over the last six weeks, I’ve had a 14-16% weighting.

At times, I also discuss using options for timing and futures for trend following.

The same applies to hedging. Naked puts were the best hedge during the first move, but if there’s a second move, they may not be.

Let’s see what happens.